The claws are out in Nokia’s fight with Apple over a new standard for the so-called nano-SIM card for smartphones. The two companies are championing competing proposals for a next-generation smaller SIM standard, and Nokia has threatened the European Telecommunication Standards Institute (ETSI) to take its technology toys home if that body chooses Apple’s proposal over the one being championed by Nokia, Research In Motion (RIM), and Motorola Mobility.
Understanding the Fight
The battle between the tech giants is an interesting one. On the one hand, Nokia, RIM, and Apple have all proposed different solutions for the 4FF standard in Europe. This standard is also referred to as a nano-SIM card, as it is for a smaller SIM card that will give smartphone makers that much more room for components in their devices.
While Nokia, RIM, and Moto are all backing Nokia’s proposal, Apple has lined up several major European carriers. At stake is not only what form the nano-SIM card takes, but also whose patents are involved, and this is likely where the key battle truly lies. Patents included in a standard are subject to fair, reasonable, and non discriminatory (FRAND) royalty licensing terms, but this normally still adds up to real money for the patent holders.
Play to Your Strengths…
As part of its pitch, Apple said earlier this week that it would contribute its relevant patents royalty free, a really tempting offer to anyone who might be using this standard. The caveat is that Apple will do so only if all other contributing patent holders do the same thing.
That’s an issue that plays to Apple’s strengths in a way that could probably be better described as a sucker punch to the competition. Apple makes its money from the sale of hardware, and the company has heretofore showed little interest in licensing out its intellectual property to other companies.
Nokia, Moto, and Samsung, however, all make steady money by licensing their patents to other companies, and by having some of those patents included in all manner of standards. Apple is essentially trying to shift this particular standards fight to a playground where Apple rules with an iron first—hardware profits.
For instance, Apple reportedly earned 80 percent of all mobile hardware profits on the planet during the December quarter of 2011. Apple isn’t worried about earning money from licensing its patents, it wants a SIM card that gives it the most flexibility when designing that hardware. If it can get that without paying anyone else for their patents, so much the better.
Furthermore, Apple has stacked the deck in ETSI by registering is European subsidiary companies as individual members, each of whom gets a number of votes in the standards-setting process. According (subscription required) to The Financial Times of London, Apple currently has 183 votes, “roughly double” the number of votes that Nokia has.
Nokia is displeased with this particular maneuver and has accused Apple of circumventing the selection process. Of course, Nokia does have its own dog in this fight, as noted above, and there’s little reason for the company to be happy about going from being the world’s most important cellphone maker to Apple and Google being the big boys on the block.
Which brings us to Wednesday’s news, when Nokia literally threatened to take its toys home if ETSI chose Apple’s standard. The Finnish company said that it would not contribute any of its 50-some patents it says are needed for Apple’s proposed standard if that standard is picked.
In a statement published by The Verge, Nokia is accusing Apple of not playing by the rules and ETSI itself of not abiding by its own rules. The company also said that Apple’s standard, “does not meet ETSI’s technical requirements and which would be inferior for consumers and the mobile industry, unnecessarily increasing the cost of mobile devices.”
“We believe that Apple is misusing the standardization process, seeking to impose its own proprietary solution on the industry and using ETSI merely to rubber stamp its proposal, rather than following established principles and practices,” Henry Tirri, executive vice president and chief technology officer at Nokia, said in the statement. “We urge ETSI members to resist this behaviour, which is not in the best interests of the industry or, more importantly, of consumers.”
The company further added that the proposal being backed by itself, RIM, and Moto does meet the technical requirements of the standard, and that Apple doesn’t have relevant patents anyway, so there.
To Win By Any Other Name Is Just As Sweet
Petulant threat or savvy negotiating tactic, this is a serious threat that could result in a years-long delay in developing a new, smaller SIM card standard. With Apple and its competitors looking to squeeze every square millimeter they can out of smartphone design, such a delay hurts everyone and benefits no one.
It may, however, get Nokia what it wants.